Technology

Digital drag forecast on media growth

Emily Steel

13 Jun, 2012

Consumers' reluctance to pay as much for digital media as they do for physical products, such as news, books and music, will drag on the global media and entertainment industry's growth over the next five years, according to a new industry forecast.

The media and entertainment industry is likely to grow at a 5.7 per cent compound annual rate over the next five years, slower than the 6.6 per cent annual growth rate expected in nominal GDP over the same period, according to PwC' annual outlook for the sector, which is to be released on Tuesday.

Behind the discrepancy is the industry's transition to lower-cost digital products that are generally cheaper for consumers than traditional physical media offerings, such as news, books, music and video games.

PwC said this reflects the "end of the digital beginning" for media and entertainment companies, where digital media and entertainment become more central to business and people's lives, driven particularly by tablets and smart phone devices.

Stefanie Kane, a partner in PwC's media and entertainment practice, said: "Digital is no longer something over there. Instead it is embedded in business as usual and embedded in the consumers' lives every day."

Even so, PwC said the media and entertainment industry is expected to grow by 5.4 per cent this year to $1.69tn, up from 4.9 per cent last year.

Global advertising revenues are expected to finally surpass pre-financial crisis levels this year, increasing 5.6 per cent to $513bn, driven by strong growth in internet ad spending.

Digital entertainment and media revenues increased 17.6 per cent globally in 2011, in sharp contrast to a 0.6 per cent increase in non-digital revenues, PwC said. Digital media is expected to account for 37.5 per cent of the market in 2016, up from 28 per cent in 2011.

Weakness in Europe will cause the Europe, the Middle East and Africa region to grow the slowest this year, increasing 3.5 per cent in 2012, down from 5.2 per cent last year, PwC said.

Latin America will be the fastest growing region in 2012, with a 9.2 per cent increase. North America will grow 5.7 per cent in 2012, helped by an influx of ad spending from the upcoming US elections and the summer Olympics, while Asia Pacific should grow by 6.6 per cent.

China and Brazil, meanwhile, are expected to track the fastest growth among countries with more than $25bn in media and entertainment spending during the next five years, with expected compounded annual increases of 12 per cent and 10.6 per cent respectively.

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